Last Wednesday, September 15, 2021, the United States Department of Treasury released a study on the significance of child care to the U.S. economy and to families. The report, The Economics of Child Care Supply in the United States, indicated that for an average family with at least one child under age 5, approximately 13 percent of family income is needed to cover their child care costs and that that figure was unaffordable for most families. The report went on to say,
“Notwithstanding the high costs borne by parents, margins for child care providers are low and many struggle to make ends meet. They survive by keeping costs low. Labor, the main input, is overwhelmingly provided by women, many of whom are nonwhite, who earn low wages leading to high turnover. Many child care workers are paid so little that they rely on public services for their own economic needs.”
Some economists have highlighted the role of child care and child care supply as a major factor in delaying some workers’ return to the workforce. Child care took a major hit during the pandemic due to several factors such as uneven demand with some parents at home and other parents needing even more as they were part of the first responder force. Odd hour demands due to the pandemic, and low margin child care providers unable to sustain their centers due to increased health care precautions and requirements and other factors.
The Treasury report noted that generally parents are asked to pay for child care when they can least afford it in their early earning years when their income is low, and child care needs are more costly for young children. The report also shares what the U.S. pays for and supports compared to other countries and finds us far behind. The federal government did not begin to fund specific child care funding permanently until the Child Care, and Development Block Grant (CCDBG) was created in 1989. It was a limited block grant of less than $1 billion but was the first successful effort after President Richard Nixon vetoed a comprehensive plan in 1972 and after we dropped the continuation of child care funding after the end of World War II.
The House Education and Labor Committee draft of a child care bill to become part of the reconciliation envisions child care funding that would be provided on a sliding scale. Families making less than 75 percent of a state’s median income would have the cost of child care (for children under 13 years) covered. Families making 200 percent of a state’s average income would have child care costs capped at 7 percent of their income. These proposals (which are still open to change) would be supplemented with increased Pre-Kindergarten services and increased support for Head Start, including $15 billion to increase compensation for the Head Start workforce over six years. Another challenge for child care and pre-K and Head Start classrooms is losing staff due to higher-paying competition, including K-12 schools.